Greetings from a Debtor Nation
Graphic by chartsbin.com.
On my calendar I had noted that this week has a few significant events. Philadelphia is holding its primary elections today, which we are not likely to forget; we have been bombarded by telephone calls promoting council members and judges all weekend. (When I start getting calls from former mayor and governor Ed Rendell, I know it’s election time. The man never says hello when I see him at the food court in my building.)
For my Norwegian friends, today is Independence Day – Syttende Mai. I wish you all a very happy one.
But the third item of note for my week has me a little more preoccupied than our local dynasties competing for succession, or even than the celebration of Norway’s independence. When I read Aftenposten‘s biggest lead-up to the day – which was to tell investors they’ll be well off if they have money in hot dogs, ketchup, soda, and balloons – I realized I might normally scoff at their focus. Under current circumstances, however, these investments might not be a bad idea.
You see, yesterday the United States reached our debt ceiling. In other words, we have maxed out the line of credit as a nation and are down to whatever is left in the operating account.
In a couple of months we’ll have cleaned that out, I assure you. Then, that $19.7 billion we owe Norway – and the $14.1 billion we owe Sweden, the $12.8 billion we owe Denmark, the $32.7 billion we owe Mexico, the $100.6 billion we owe Switzerland, the $134.7 billion we owe Canada, the $184.4 billion we owe Brazil, the $511.8 billion we owe the United Kingdom, the $877.2 billion we owe Japan – will be in serious question.
And these are just some of the nations we think are less likely to get stroppy with us.
I’m here to tell you all: you should get stroppy. Very stroppy. Because, to use the language of a South African classmate in 1988, these are not sober-minded people we have elected, and their behavior with regard to the nation’s economy is irresponsible.
This happens, of course, when you vote for people because you think you could have a beer with them. Your “buddy” may well stick you with the tab. And before long, this practice – just like hesitating to regulate industries and wanting to lower people’s taxes to give people lots of spending money, while avoiding dealing with already held obligations, public services, and rising costs – becomes a national habit.
You end up with a room full of iPads, a sagging roof, and a dead tree teetering perilously over the neighbor’s car.
I understand the concern, from Americans who hesitate to raise the debt ceiling, that to do so is to encourage bad spending behavior by making money available for it. Our government certainly has some sort of compulsive spending problem, not least in subsidies to the oil industry. But what these critics miss is that they themselves practice the same behavior, and they would be (and have been) outraged when denied the option.
In harder times, both businesses and individuals turn to credit to keep the bills paid while working to decrease expenses and increase the revenue stream. Both elements – the holding pattern and the restructuring to boost income and repay the loans – are essential to the future of a firm, and often to a household. It is why, in a capitalist society, low interest rates are so important in a recession: to be able to invest in a future, one must have the option of borrowing with the possibility of paying back the loan.
While “common sense” doesn’t apply to all areas of governance and economics, this one is pretty clear.
For the government to try to avoid borrowing and avoid taxation is simply not tenable. And sticking bills in the drawer, unopened, has a very real effect. The average American practicing this sort of economic irresponsibility encounters that effect through concepts such as foreclosure, repossession, liens, and garnishment of wages.
It remains to be seen how the government will encounter it. You all, as our creditors, may want to get creative.
My father, who survived the Great Depression only to arrive at a point where U.S. politicians figure that not paying the bills for a while is of no great concern (the expressions on the faces of the PBS NewsHour interviewer and New York Times writer pretty much mirrored our own), says it’s time for a plebiscite here. I’d agree if I thought reasonable people would come out and vote. But I think our national responsibility quotient has declined to the point where the idea of a plebiscite is far more optimistic than I am (and I tend to be pretty hopeful). Further, the mainstream media thus far have paid this relatively little attention – another “oh well” moment on our national landscape, paling in comparison to the sexual antics of the IMF chief (and the delightful tours of Harlem and Rikers that he’s getting).
Perhaps you, the nations purchasing our securities and lending us money, need to consult among yourselves about measures to show your disapproval. As our creditors, perhaps you can even help us, the way we allegedly help people who have problems with their personal finances.
Meanwhile, though, start looking to your wallets. China is already quietly but steadily relocating its assets. Especially for those who suffered the fallout of Iceland’s fantastic economic debacle, I suggest you do the same. (And poor Japan – you don’t need to have a worse year than you’re already having. Look south.)
I can tell you that if Americans go to redeem their savings bonds and are told they aren’t worth the paper they’re printed on, the reaction will not be pretty.
And it shouldn’t be. It does not, as economist Kenneth Rogoff has said, “seem like any way to run the government.”
Addendum: In March 2010, the New York Times ran an interactive budget feature to challenge Americans to solve our budget problems. I didn’t find it all that onerous to do so – and I didn’t completely eliminate anything, as I recall. I was willing to give a hit to my own favorites as well as those of the “opposition.” This is why I can assure you that the people we have down there now are not in the least bit competent.
I am, after all, a liberal arts major.